flights are overbooked. there's not the room on the planes that three used to be to give away the seat. >> thank you very much for the help sorting through the airlines. we appreciate it. we'll talk to you soon. >> okay. all right, that does it for us today. make sure you join us tomorrow. right now it's time for "squawk on the street." ♪ it all happened right here everything from twitter's ceo kicking off their ipo to mickey drexler talking retail, howard schultz, jamie dimon, mariano rivera. they've all joined us at our set post nine which is two years old today. it is where we keep bringing you the big moments every day and stick around to who see is bringing us a surprise birthday gift this morning. good morning, welcome to "squawk on the street," i'm carl quinnty naia, with jim cramer and david faber at the new york stock

exchange. go, guys, unbelievable. >> i was shocked. a couple months. feels like a couple months. >> the story of my life these days, where does my time go these days? >> it's brilliant. >> big day setting up today, janet yellen is on the hill and a ton of retail earnings. the premarket, ten-year yield durables came in ahead of expectations and europe is dragging a bit some say as the war games on the russian/ukraine border look a little worrisome. the roadmap begins with retail, jcpenneys and best buy in rally mode as earnings top estimates despite flat to slowing sales. >> janet yellen is back on capitol hill this time testifying in front of the senate. this is an appearance that was postponed because of a snowstorm a couple of weeks ago, so any chance she's changed her outlook since then? >> and an electric expansion, tesla says it plans to invest $2 billion in a brand-new battery factory somewhere in the southwest within the next three years. the question is which lucky state will tesla call its new

home? first up, another big morning for retail, jcpenney posting a narrow-than-expected operating loss. ceos mike alleman says the turnaround remains on course and sears holdings posting a narrow-than-expected q-4 loss. which was the most interesting? >> i think the de-johnsonfication of jcpenney is really important. you had no idea how much this guy wrecked the company, okay? he wrecked the apparel. he wrecked the way that we do promotions and he even wrecked home goods. he said when we pull the plastic off the home goods, we saw how out of sync they were. so, as you get past every single square foot that this guy wrecked you pick up cash flow and this was a quarter some people are saying out of the woods and some guys are still

saying liquidity issues, but they got rid of every single thing that this man had come up with. >> now, it's hard to view as a positive, though, coming up with an up 2% comp off a down 30% which is what we're talking about for the fourth quarter. that is not how you create profitability. >> a 40 basis point improvement in profitability is how you create it. >> those that are positive about the positive free cash flow. >> right. but it's the quarter that you always have -- >> i know. and by the way, the sales productivity continues to decline. you know, when you talk about the long term here, don't you have to take into account that it doesn't seem particularly -- >> they see comps three to five this year and people are saying you need to start showing double digit comps to move beyond stabilization. >> i think the problem is, is that we didn't like the old jcpenney, where there were a lot of promotions -- >> but they made money. >> but they made money and that's what you're talking about. you are talking about a not

great retailer making some money. a kohl's is a little better. but kohl's trades much higher. i'm just saying the investable case for jcpenney is still they are not going under. do you know what, they've reinvented the store because all they did was bring the store back to where it was when no one was happy with it anyway. >> he did spend a lot on cap-x so they may not have that to worry about quite as much. the stores don't look bad. >> no, they don't. i remember when he was being ousted so to speak, sephora was his interest, because sephora, there it is again, the sephora is back. all those different joes, you know, joe fresh, the stuff that made it sound like it was wholed tos, all gone. >> sephora did drive a lot of traffic in the quarter. >> yes. >> the home they were in total clearance mode. they see a billion in liquidity throughout the course of the year, david, it's unclear whether it includes asset sales coming down the road. but to what degree do they address vendor concerns going forward?

>> well, this helps. >> yes. >> certainly when you talk positive free cash flow your venders are a little less on edge. and, you know, i think it's -- it's different than a sears, for example. >> right. >> so i'm going to get into a much more detail later in the faber report, which had a conference call, taped conference call, and a slide presentation that i think was designed to try to quash any fears among its vendors but -- >> it sure was. >> but programs erhaps it won't successful but i want to go into it later. >> pvh reaffirmed its quarter when they did a debt deal and pvh is the supplier that gets mentioned the most in the jcpenney call and you can argue that they'll pull it off and you should buy pvh, remember, that's a lot of their different labels that people really liked. izod, that's pvh and it's a legacy business. >> it is. you may look at jcpenney this morning and say, wow, 20%, it's the eighth most shorted name at

the nyse and as someone pointed out, 20% but instead of being 93% off the high it's 91% off the high. >> look, you got the law of small numbers here, i mean, i am watching blackberry trade and someone was saying to me, i bought blackberry at seven and went to ten and people want to buy jcpenney at seven and go to ten. i would like to have some more reason other than the fact we are not as horrible as we were. we're no longer terrible. because there's a lot of retailers, like, target, they were never really terrible. they had a breach. stock comes back. i guess i'm saying is that people want the percentage gains so badly that they're willing to overlook a lot of risk and there are a lot of retailers that got thrown away that turned out to be not as bad as we thought. >> you want to talk best buy as well? >> exactly. >> we haven't gotten to that. the shares are looking up on my screen, you can see that there as well. after a very disappointing preview of that fourth quarter that we got from the company a few weeks back that sent the stock down, what, 28% in one

session. >> dollar 24, beats by 23 cents, comps down one two. >> firing to grow? right? are they firing to grow? i do like the fact that they are now taking a longer-term perspective, a lot of people got ahead of themselves. the renewed blue. i love the term they use on the conference call, multiyear journey. for those of you who think it's multimonth, it's a multiyear. >> multiyear journey. it's not easy to do in retail. >> we have a multiyear journey down here. >> we don't sell any hard goods. >> we're not go pro. >> online up 26 on top of an 11% gain last year. that's progress. >> yeah. and, look, a lot of people, we're going to talk, david, on your faber report, but people are talking about dot-com, they were calling it that for a while and they called it online and they reverted to say dot-coms and they are doing quite well for some companies. >> you want to save sears? >> for the most part.

the stock may be looking up because they did say that february sales are positive. but there's a lot to look at on sears. by the way, he put his annual letter out. that being eddie lampert who controls the company, and he also put out as i said this presentation, a taped conference call. they don't even do conference calls very often. >> no. >> although they've done two in the past that were allowed for interactivity, meaning questions, this was not the case. >> how about the cfo talking, kind of a little dialogue? >> but we'll have a lot more on it because there are interesting things going on including the spinoff of lands' end which is supposed to take place this quarter. an hour from now janet yellen will deliver part two of her capitol hill testimony. the world is quite different from three weeks ago. markets looking to see what she'll say about ukraine, the impact of the weather and, of course, the fed's tapering of its bond-buying program. we'll bring you coverage including yellen facing questions from lawmakers.

not always as spicy as it is on the house side, jim, but we'll see. >> look, we're at a weird moment here other than employment everything told me in the last three days that interest rates should be much higher. turns out that people are spending more. turns out the homes are better and credit is more available. but then i come back and, geez, the thursday number, not that great. and people keep waiting for these bonds to either go down big or go up big. and i'm looking, i'm going to have to pay attention to every word she says even though i would like not to. >> even though we heard from her a couple of weeks ago, there's an expectation she'll change her tune in any way? >> no. how about this? i'll admit that i am baffled by where interest rates are and i'm looking for every clue i can get? how's that? >> okay. >> speaking of anniversaries, in 2006 the italian ten year don't laugh it's the third largest in the world. was it 3.5%? remember that in november of 2011 it traded to seven. it was the end of the western world where, you know, maybe our

ten year should be at 2.6%fy can get that attractive bond. >> 3.5%. >> is that a win? >> talk about wins, greece is trading at something, like, 63 cents now up from 13. they did the exchange at 32? so it's double. don't exchange your bonds next time a country wants to buy them. >> guys call me, the national bank of greece, is it the opportunity of a lifetime? geez, greece is the word again. greece is now the positive word. >> it's got mood and feeling. >> i'm still singing along to that and not "frozen." >> it has a constant run in the living room. >> does it? the >> both the wife and the daughter, it gets crazy. >> crazy. >> a lot going on this morning. tesla keeps climbing, the electric carmaker announcing big plans for its future, details on that coming. . and also ahead itten out with its first earning report since returning to the public market, a bit of a miss, but its

pipeline, jim and david, may be the biggest in the industry. >> it's not as expensive as the others. i have starwood on tonight. it's not expense pitch and the premarket, yellen not too far away. a lot more "squawk on the street" from post nine, 2 years old today. in a moment. let me talk to you about retirement.

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♪ welcome back. the letters keep flying in the battle over ebay. this morning carl icahn releasing a third letter, but interestingly, and i want to share this with you, we have now gotten a response from ebay's chairman, the man who founded the company, of course. no longer involved in day-to-day management of the company, but nonetheless continues to be the chairman of the board, puts out a statement that was just released moments ago saying, hey, i am the founder, i'm the chairman, i'm the largest shareholder and, by the way, this board is deeply committed to doing what's in the best interests of all shareholders after diligent consideration, we believe paypal and ebay are better together. remember, this is the crux of the question that mr. icahn is putting in front of shareholders in a nonbinding shareholder proposal that will take place at some point. they haven't set the annual meeting for ebay. going on to say after diligent

consideration we believe they're better together. in the future if we determine that's no longer true, we will act accordingly in the best interest of shareholders. and he goes on to say that instead of having an honest discussion about a reasonable question, that being whether the company's better off split apart or together, mr. icahn has chosen to attack the integrity of two highly respected and qualified board members. we have detailed those attacks for you in the last couple of days with the letters we've received from mr. icahn, they are cot cook fowntder of intuit and marc andreessen and he attacked the integrity of our cfo tom donahoe. they have my full support. over the last six years our company has been led through a significant turnaround a job many people thought was impossible and in that he's driven paypal's growth and brought a renewed focus on innovation across the company. >> i don't know. because the attacks are so brutal. in carl icahn's note he says, the idea that -- >> this is a new one.

this is the third. yesterday he came out with one. today he follows it up. he must be a little bored. >> here's what people at home can really understand. the analogy. having mr. cook on the board while planning paypal's future is akin to having pete carroll sitting in when the denver broncos were constructing their game plan during the super bowl. that actually did happen. illusion how bad the broncos played. >> don't rub it in. >> what you are really saying in this charge is it's treason. he's saying corporate treason, all right? >> although, again, to this idea on skype in particular where icahn has attacked andreessen as essentially having said he lined his own pockets at the expense of shareholders. i want to respond. the company's already responded to this by saying throughout the board's process of vesting skype andreessen recused himself from all deliberations on the transaction, including all discussions, negotiations, and defenses. ebay and its shareholders benefitted from the divestiture of skype in a sale to microsoft.

they kept 30% of it so there was upside there and he points out that marc was elected to the board in 2012 with 99.7% approval. i don't think that means much. >> no. >> when you don't have a challenge. and he also goes on to say that the claims about scott cook are also unfounded. as the founder of intuit, he says scott has an exceptional track record of creating value and has enormous assets and the overlap between intuit and ebay is very small between both companies. regarding hiring, any restrictions ended years ago. >> i am trying to think are there situations where a guy is brilliant on the board where you overlook some of this stuff? is it possible? is it possible that you want andreessen on your board and that carl icahn addresses your public comment to have him come on, could you overlook this? or you can never do it? >> if you were advising carl would you argue to attack andreessen, skype and that whole block undermines your broader argument about what belongs with what?

>> actually, yes. i'm loathe to consider to even criticize carl, but i have been spending a lot of time trying to figure out the value of paypal and the breakout. >> and? >> i think it's a great intellectual exercise we've seen over and over again when you get the management away from the ebay and do paypal, they can make it more into a powerhouse. >> your assumptions there have to be just that. we don't know. we'll never know. many believe the businesses are better off independent because as you say there's more invonation and more willingness to take more risk. there are others who say paypal still benefits from ebay and all the usage that ebay generates and cross pollination in a lot of different ways. >> this is the pepsico nelson peltz and white wave was spun off from dean foods and it was a so-so milk company and next thing you know you have silk and the incredible natural foods. >> also in the case of paypal perhaps a higher multiple simply on the perhaps that its growth rate is then, look at visa, mastercard, hello.

>> does frito-lay have a higher multiple than soda? look, i'm just saying that it's an intellectual debate that has been solved by some companies like a fortune brands where it really worked and i would prefer to see that than see mud thrown. >> yeah. >> i like the mud thrown. >> you are a queens guy. >> it's so snarky, right? >> yeah. >> icahn's from queens, too. it's fun. come on, marc andreessen, you are still invited to come on anytime. >> he's been outspoken about the state of journalism in this country. >> i want richard sherman's view. >> his integrity is being attacked every day and he has nothing to say? come on. >> the 12th man. i want to know who the 12th man is here. we'll get the "mad dash" counting down to the opening bell and one more look at the futures here and a lot nmore "squawk on the street" straight ahead. tdd#: 1-888-648-6021 out there, tdd#: 1-888-648-6021 there are stocks on the move. tdd#: 1-888-648-6021 in here, streetsmart edge has

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♪ let's go higher higher higher off the ground ♪ ♪ it's taken me higher higher we got eight minutes before the opening bell and time for a "mad dash" on this thursday. you want to talk verizon? >> yes. this is one of the largest widely held companies in the world. david, every day a major broker comes out and says this is it, the focus one. you name it, it's the super duper. today's jpmorgan focus, morgan stanley says buy it. david, it won't move. it just doesn't move. why? >> i'm not quite sure. there was this issue of what we call throwback in other words, they issued a billion something shares to vodafone shareholders to complete the deal. many of them can't hold the

stock, don't want to hold the stock, sell it back. that can create selling pressure although it's not clear to me, i thought a lot of those fears had abated and a lot of that selling had abated. >> unless you think interest rates will shoot up, this may be the opportunity. this is a growth company. there's a lot of good numbers coming. >> worries, though, about continued price competition. sprint was on last night and we know what t-mobile has been doing, they had to spend money to upgrade the network in new york and they completed all of that in terms of any problems people were vhaving but there's the linger suspicion is it getting more competitive and will it hurt margins? >> suddenly they are done with the deal and they all come out and say buy it. it should move. this is not a good sign. it should be back to 48. >> it's got a 4 1/2 percent dividend. >> i focus on the higher rates issue. the overhang could be big. i want to point out to people who own the stock i would not dump the stock here. i would not dump per vizen. i think the analysts aren't

wrong. i think it's a good story but it's a puzzlement that every single big firm have come out and said buy it and it can't get out of its own way in a rally. >> we'll talk about verizon and after having dan hesse on "mad money." the opening bell a few minutes away. keep it right here.

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you're watching cnbc "squawk on the street." live from the financial capital of the world. the opening bell in about three minutes as we celebrate the second anniversary of our set here at post nine which i don't know humbly, guys, i think sort of changed the way we deliver news from the nyse. >> look, when you're in the booth you are different from when you are on the playing field. no one's on the playing field. >> and we've certainly had a good time doing it. you were just talking about sprint and soft bank and t-mobile, you talked to dan hesse, david referenced the conversation. >> basically i felt the takeaway was there would be a deal here. there's a lot of competition. i don't know the makeup of the deal. i did think that dan hesse tried to take it back a little bit, but the idea -- this is so

ongoing. it is happening. >> should we listen to what he had to say? >> here's what hesse told jim last night. >> what we're talking about is not going from four competitors to three competitors but going from two big strong competitors to three big strong competitors. >> well, i mean, three big strong competitors means to me t-mobile and sprint are getting together. >> well, who knows what might happen. but if that were to happen, and i'm not saying it will or it won't, i believe that three strong competitors is better for the competitive landscape in the u.s. >> am i reading too much into it by just saying, listen, he's basically saying there's going to be three? >> his problem is his say is not the final say. he can agree and his parent soft bank can agree to -- well, deutsch telekom can agree to do a deal to try to merge t-mobile and sprint but what does the doj and the fcc have to say about it? do they have to go to court? what will happen there is the key question. they have made it very clear. in fact, far beyond what we

typically see from regulatory agencies that haven't been actually queried on it officially saying, we don't know about this, and every day t-mobile makes it more difficult it would seem to argue that it's not bringing price competition because it is. >> right. >> and you care about the consumer. >> it's google, facebook. i mean, comcast, the parent company. the competition versus the time when t-mobile was going to merge with the at&t. the competition is extraordinary. >> the argument that they'll make is that a three -- a much better capitalized three will be able to really bring it to verizon and at&t in a way that t-mobile or even sprint are not able to now. yes, there's some price competition but it's going to run its course. they don't have the balance sheet. they don't have the spectrum, they've got to be in both, really, really, truly make it a three-way race. >> i felt after i said i don't want to sell sprint. and i don't want to sell t-mobile. i think there could be something here. >> all right. with that in mind let's get ready for the opening bell here as we take a look at post nine. we're just reflecting on the

number of executives hat have visited this set, dimon, dorsey, shultz, dressler, mcadam, moonves, stoppleman, and, of course, eva longoria with david. you can't -- i can't get that -- >> i will never forget that. >> neither will i. the fixed income etfs and lattice semiconductor celebrating 25 years on the nasdaq. by the way, guys, the nas is now 14.99% away from its all-time high as biotech continues to power them. on the russell, 11 of the top 14 names are in biotech. >> fda approvals, wonder drugs. these are companies that are developing pills that actually save people's lives. what i'm saying is, i think there -- i think that they're expensive, but merck and pfizer passed gm in value in the '80s and people laughed about that. if you have blockbuster drugs

that can have multiyear $10 billion, $12 billion franchises i can understand. but everything has to work out tesla-like in order for it to happen. >> tesla-like. it's up again. all's right with the world. >> what's today? thursday, plus nine, it goes up nine on thursdays. >> i think it's wednesdays. maybe they are switching it this week. if you haven't heard already, tesla considering four states for the $5 billion giga factory, nevada, arizona, new mexico and texas. they're going to do it with panasonic. 6,500 employees. they'll start construction this year. supplying batteries for 500,000 cars by 2020. >> that was an eye-opening number. obviously i think that this is also a solar city play. scty, the sister company, and the people who are buying these stocks just know you are playing with fire. i totally understand. everybody likes to make money overnight but understand you are playing with fire. a big convertible bond deal.

we would see people buy the convertible bond and short the stock. it didn't even nip the stock when they announced this thing. >> no. and they're going to need to raise more, $5 billion overall. we pointed out yesterday why not keep selling the stock, they did a convert, they hit the market. >> so it's so loved. i'm listening to "squawk" this morning and they are talking about driving one. wow, driving one, that means it goes up how many on a drive? how many go on a test drive? i mean, i test drive, i loved it, okay? so i should go pay this price for it? all i can say is that you need them to destroy the electrical grid to pay these prices. not just the car business. >> well, that's the idea, then, behind this giga watt factory, they can bring it down to 150 or some -- there's different numbers. the viable competitor to actually store -- >> he's splitting the atom. all right? let's use that always the equivalent. splitting the atom. >> he's oppenheimer. >> oppenheimer and not just the brokerage firm. >> los alamos not far from

arizona. >> he's got to go right next door. >> myelin is on the move, a generic drug company beat three cents to 78 cents and in a position to execute another substantial transaction. you were just talking about the drug makers a minute ago. >> forest labs activists, what a great deal. these are commodity players. tevas is coming back. they are starting to make a move. remember the marginal cost of making a pill is very low. but paragos made so much money, the activists -- not activists, but activus. >> they think about this when they talk about consolidation, i think they are still running the place will they eventually choose to make the big sale. there's a chatter around consolidation in pharma will valiant do another deal. gets bigger.

got to get bigger. >> myelin is a logical one. the stock traded so much lower. >> not to mention tax inversions. we've seenet so often in this area. finding a way to get to ireland is really what it amounts to or some other tax jurisdiction other than the united states my favorite having been that one that endo did with paladin and they both ended up in ireland. >> i like paragos that is in from ireland. isn't that the melting pot story there, israel, ireland. >> global economy. >> we could use tax reform and this is the perfect example. >> alchemy, what a great company, moves to ireland, boom, like that. gm one of the worst performers this morning down 1.5%. ntsa will open a probe into the faulty ignition.

and a lot of users are bed bath, vm, target, ralph lauren. >> a lot of profit taking. ralph lauren was upgraded and downgraded at goldman. the group, these were huge moves yesterday. you take them back a little bit and then i think they settle in and you buy them again because these stocks are much cheaper than the average stock in the market. and i like that. i like value. >> all right. how about a faber report? >> how about it? let's talk sears holdings. in fact, i wanted to punch it up here and make sure i can see what the stock is doing. look, it is up over 4% this morning. sears did report earnings or lack therefore i should say for the fourth quarter and the full year ended february 1st, 2014. and net losses attributed to holding shareholders $358 million for the fourth quarter lost $1.4 billion for the year compared to a loss, by the way, last year that was $930 million, though, they did generate $12 million in ebita. but, hey, it was positive for the first time. you can see some of the other highlights here.

comp stores down 6.4 versus estimates of 6.9. holdings, revenues, 10.59 versus what had been a 10.5 estimates and they beat some of the estimates out there and hence the stock is reacting positively. they also said some things on the taped call i believe that february sales were looking positive thus far. but there's a bigger picture here, of course, with sears which we've been watching for so many years after the merger with kmart and eddie lampert being the controlling shareholder and this idea there was always a plan "b" namely around the value of its real estate, never really came to the fore and it is a challenged company in so many ways, of course, with its sales being down quarter after quarter after quarter. it not spending a lot on cap-x, the state of the stores. what is the plan. well, on a taped call in a shareholder letter this morning that he released, here's some of it -- here's ed lampert on the transformation of the company. he says the size and scope of this transformation we are pursuing is substantial. we're in the midst of

transforming sears holding into a member-centric business that provides and delivers value by serving its members in the manner most convenient for them. jim, i want to get to the finances and the liquidity, but i'm curious as to your thoughts. >> lands end, it was a brand that was not destroyed by sears. when you have point-blank update on asset reconfiguration activities and s.e.c. prorated distribution and lands end to pay $500 million exit dividend, it's worth a lot of money. >> right. and that's a key actually. they are spinning off land's end and it will take on $500 million in debt and it generates $100 million in ebita and the money will go to sears, we often see this. let's go to finances and liquidity, because a lot of the slide presentation and i would ank the taped call were meant to assuage the fears on the part of the vendors. sears has a domestic revoler of

$3.275 million. and a billion in cash of february 1st, 2014. and the debt maturities don't look bad but it's not about debt maturities and when they are up. but, again, that's not a key consideration always much as it's a consideration of your burning cash. how much can you continue to do so as you head into the second quarter, the third quarter for the company? and i wanted to point something out because the company has put out consistently with some regularity, an s-1 for the spinoff, the regulatory filing related to the spinoff of land's end, it includes a paragraph that said the following, the sears holding boards of directors expects that lands' end and sears holdings will each be solvent at the time of and after giving effect to the spinoff and that the distribution and related transactions will satisfy applicable legal requirements. it's on page 30. and the last filing on the 21st

omitted this. there's no longer this paragraph saying that sears holdings board of directors expects lands' end and sears holdings will be solvent at the time of the spinoff. some have alerted me to that and said we're not sure what it means. to their point of not spending a lot, they got a lot of answering machines but i've not gotten an answer. i will provide it to you as to why that was omitted from the latest filing. >> i need it. they are talking about ramping up and having great people and being involved if it's totally separate from eddie lampert. this whole conference call and presentation, it is so bizarre because it's a second rate costco, membership that they are pulling off and then, you know, what is the real feature? the integration of commerce and celebrity brands. adam levine and nicki menage on shopyourway.com. how often do you see nicki minaj keeping through the craftsman aisle? is adam levine buying his shirts there? >> more of a kenwood fan?

>> it could be. >> they said they increased their members to 72% up from 58% during the fourth quarter. this is the strategy. >> but they are not making a lot of money on what they sell. >> and finally let me leave you with this on real estate and the well-known analyst, gary baller. the idea being there's still a great deal of value in the portfolio, he said they have 117 vacant properties for sale or rent on their website and most offered for over one year. it speaks to the need to balance real estate valuation and we have a lot of questions on sears. eddie lampert's in there. >> and maroon five is in there. >> great musician. let's get to bob pisani on the floor with the dow up 11. >> happy thursday, the dow and the nasdaq and s&p 500 in positive territory. everything is in red in europe. put up the boards you will see

portugal is the only thing in positive territory. the problem here is what's going on in the ukraine. everybody i talked to seemed to think that some kind of bailout is going to be needed of the ukraine but who's going to provide it and, of course, western europe will have to do that but the money will be very hard to find so that's putting a little pressure on europe right now. the s&p, three days in a row failed to break out to new highs at 1850 level is really proving to be very strong resistance for us. today some of the old leadership groups are on the weak side, biotech, utilities, consumer discretionary all on the down side. for the retailers you were talking about it but truly more of the same and weak sales and margin pressures and chico's is the great example of the double whammy, all the retail, comparable store sales down 3.4%, there's one, and the other one is gross margins a decline of 250 basis points because of the promotional activity and they didn't give guidance but the dividend did increase. and look at chico's to the down side. the rest of the retail, not a

lot of guidance but those that did in the middle or slightly to the downside. kohl's revenue guidance expected to be up 0.05 to 2% and flat to up 2%. best buy got a very good beat there but comparable store sales will remain slightly negative for the first half of the year. the only real guidance that they gave. you talked about sears, david, sears and kmart seemed to be seeing positive same-store sales for february at least that is in the positive area. hilton on the bottom line, 57 to 61 cents below expectations. did you see that about-face on tom demark? he was talking about a very low number in the s&p 500 when he was on our air a few weeks ago and now he's saying potentially we could be at 1885 within the next three weeks. guys, back to you. >> bob, thank you very much. bob pisani. getting breaking news on best buy, courtney reagan at hq with details on what the company's ceo just told her. good morning. >> best buy earnings beating the

street by a wide margin in the holiday quarter. the revenue fell short of consensus. i just got off the phone with the ceo, and he was upbeat and discussed mainly the company and its initiatives and also its pitfalls much more so than the external challenges all retailers are facing right now. the good news is best buy grew market share in the quarter but like many things it was at a cost. he told me we are continuing to invest in price competitiveness and the good news is we have the opportunity of offsets with our cost savings. we've increased our goal to $1 billion. so, that's good news there and something analysts like to hear. best buy remains focused on growing its online business and he's quite proud of the 25% online sales growth in the fourth quarter. i asked him where those shoppers are coming from, are they best buy in-store shoppers or new customers altogether? he said the good news is it's both. we're getting a fair share of growth online from new customers but we are making a push to grab millennials and we have great market share with the boomers. carl, you might remember in the

holiday sales update he told us the quarter was a bit of a speed jump, i asked him how do you feel about it now, he said i think that speed bump is in the rear view mirror. >> thank you very much, a busy day for you, courtney reagan. rick santelli is at the cme group this morning. good morning, rick. >> good morning, carl. there's a lot of action in the fixed income market especially the global sovereign market. two day's best for ten-year note yields and it gives you a glimpse of the momentum building especially where we were trading yesterday's lows. year to date a couple things should jump out at you, we held the key retracement at 275 and we are now hovering at the lowest yields in 3 1/2 weeks, february 4th to be exact. let's look overseas. if you look at bund yields they're the lowest since july. if you look at gilt yields the ten-year in the uk, the lowest since november. we can argue about what's going

on there. probably what's going on in ukraine plays in prominently to that but also the generalized state of on other economic issues and particularly the sto stock market. and now if we really consider the foreign exchange market, we look in so many directions, but look at the u.s. yield curve keeps you pretty much out of trouble as well. i picked fives to tens. we can look at twos to tens, five to 30s, they're all flattening. flattening seems to be associated with lower yields. the last chart, of course, the most predominant chart on every printer down here and that's the dollar ys tversus the yuan and dollar improves and that in and of itself seems to be one of the top stories of the week. back to you, carl. >> rick, talk to you in a little bit. rick santelli. you will not believe who is wishing post nine a happy second birthday today. got a very special gift that we'll unveil right after this break. don't go away.

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two years ago today, we debuted this set that you're looking at right here. we called it post nine because there are various posts on the new york stock exchange floors where stocks are traded, this is where post nine was located in its old form, of course, it's where david, jim and i talk to you every morning, simon, kelly, sara, the whole gang every day. got a lot of well wishes today, but the best from buddy, you know him better as kate boss of carlos bakery in hoboken, new jersey, brought us this, guys, what do you think? >> where's the knives? get going. >> i am ready to dig in. i levthat show. >> kate boss, kitchen boss, a whole bunch. and buddy sent us a greeting of his own. take a listen. >> hi, i'm buddy, the cake boss

and happy anniversary to cnbc "squawk on the street" at your home post nine, new york stock exchange, happy anniversary, guys. keep making money. i'll keep making dough. >> he is -- he is a fan of the network. we know this. >> i love that. >> yes. he's re-created the "squawk" set in various forms but that's a nice piece of dessert. you will allow yourself this after your two-hour workout this morning? >> that's a tough one. i don't know. i don't know. >> a little bit. >> a little bit. >> a little piece, like, roth? >> or i'll bring one back to you to new jersey. i'm going today. i'll bring you a big piece for later. >> our thanks to buddy and our thanks to everyone. i know jack dorsey is already favored in some of the tweets regarding the set today. thanks to everyone. when we come back, stop trading with jim. in today's market, a lot can happen in a second.

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dow's down 31. time for cramer and stop trading, jim. >> when you have a stock that's up eight and an $18 billion company you don't want to come on and say this one is not done

going higher. work day, wday is not done going higher. positive. people didn't think that. yes, and on "mad money" tonight, i cannot wait to speak to this guy because this company is reinventing both human resources on the cloud but more importantly, perhaps, financial services. it's not done going higher. >> it's always good to get an explanation quickly. they go into a company and they give you a suite of services that take care a lot of these kind of things. >> save a fortune and the businesses a part of the company that does not generate any money and suddenly he comes in, remember, peoplesoft. hostile bid, oracle. this is the revenge against oracle. i like this stock. it's not done. 70% revenue growth where are we going to get that? where are we going to get that? >> you mentioned bennieoff, what a week he had regarding arizona. >> marc has got that quarter srm has been a monster stock ever since he did the split. doesn't move the way it used to

because it has liquidity. market is no longer -- i'm saying he's no longer controversial. remember when that was a controversial stock. i think the world is going towards his business model and software as a service and workday is based on sales force, too. let's hear what he has to say. he's smart. david i got to ask you. up $2 billion. it's not wrong that it be up big. momentum managers will hear 70% growth and will stop at nothing. david, deutsche bank said multiple suitors for safeway. can't seem to kill this one. >> no, listen, it's not a rumor. the company told you it was in talks last week and i told you it was in talks with private equity. the company on its earnings announcement said we're in talks. we'll not tell you more than that. they are. they are absolutely in talk with pe, and sererbus not a great buyer. be careful with safeway. there are others who believe fair value for the company even

in a deal will not top 40. the stock's moved up a lot. i know a number of accounts that have sort of started to sell in this strength. >> kroger was here. remember how this is a challenge business right now. when mackey and walter robb went whole foods which is one of the great operators, i don't want to own a supermarket stock. i want to own -- i'm willing to own whole foods as a concept stock. i don't know why anyone would do this except for the fact that they made a lot of money with safeway once before. >> when they took it public, private, and then, of course, public again. >> you are about to step off but yellen is about to step on. are you on alert for any surprises? >> i got to figure out the bond market. i hate to come on the show and say i can't figure it out, but sometimes you have to own it. congratulations for the an ve e anniversary for two years. >> you have more to do after "mad" a book signing in the garden state. >> at words in maplewood, new jersey, it's terrific and the

best pizza in new jersey across the street. >> get there early because the lines are long. i love seeing it on the best seller list. >> thank you very much. >> it's above "lean in." on the last list. >> thank you. >> back to capitol hill, the hot seat for fed chair janet yellen, she faces a grilling from lawmakers after her previous testimony. we'll get live coverage of all of that when "squawk on the street" comes back. i always say be the man with the plan

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take you to a live shot of capitol hill where fed chair janet yellen will be testifying in a moment answering questions from the senate banking committ committee. our senior economics reporter steve liesman joins us from headquarters today to talk about whether or not her testimony will be the same as two weeks ago, steve. >> that's an easy one, carl, it will be the same. but i don't think the "q" and "a" will be. she's had a couple of weeks to think about it and new data has come in. durables down 1%. down a little less than expected but that came with a december revision of minus 5.3 which was a point worse than originally reported and marking down gdp again for the quarteren. probably somewhere in the twos

and shipments down 04. and business investment 1.7% and jobless claims 348,000, a lot of talk that's a weather effect. that will be a big issue for yellen on the hot seat. i think that's the first thing that will be out there. the other reasons for recent economic weakness we'll see where else she weighs in. and finally the fed has a big problem, the 6.5% unemployment rate, would be the threshold for raising rates and there's general agreement from the fomc it doesn't work anymore and the question is what is the fix. we had other measures about labor slack in the economy, i want to show you one here and the reason why this is potentially important for the fed is see there's the green line, the unemployment rate. that's come down. but it's not come down for all the right reasons. yes, some people are unemployed, but others are dropping out. there's another measure of labor slack right there which is

part-time workers working who want full-time work. that might be another measure out there, guys, that we can maybe hear from yellen or sooth time to fix the problem we have, the unemployment rate is coming down but the fed wants to communicate there's a lot of slack in the labor market and no reason to raise rates any time soon, carl? >> we know that from the minutes that's an ongoing active discussion from the federal reserve. stay right there as we continue to wait fed chair janet yellen to start her testimony, we want to bring in bill poole, he's here with us for a treat at post nine and senior fellow with the cato institute. it's unusual to have this gap in testimony two weeks and within that two weeks the data turned softer. do you expect her to deviate at all from the message? >> unusual to have a winter snowstorm like that, too, and that's what did the job, the gap. i think the fed should emphasize over and over again that it cannot make policy on the basis

of the short-term wiggles in the data. the data get revised. they're due to weather. i think the biggest issue we have right now is the effect of the affordable care act on employment. and that's not anything that the fed can offset. fed can't fix that. the fed can simply try to understand its impact, but the fed can't fix the affordable care act. >> steve, i mean, to that point, obviously the politics are at play here. you have republican senators, democratic senators. what do you think the republicans are going to ask her most about? you think they're interested in the impact of the affordable care act or perhaps on the negative impact of quantitative easing? >> i think all of those are out there potential, sara. but my read of the politics surrounding the fed is that it's come off the boil a little bit, obviously there is rand paul out there. but i don't see congress beating up on the fed in the same way they did, say, in the last several years and really scoring any political points out there.

so, yeah, you're right, there are issues out there. i think it's more about deficit spending where they'll try to earn -- try to get janet yellen to see how far she'll go politically. greenspan a little bit more of a political animal. ben bernanke saying we'll not weigh in on that stuff and we don't know where janet yellen comes down, and saying do you know what, you need to bring down the deficits, how you do it is your problem. >> it raises questions about unemployment. that's the sticking point. that's what investors and traders want to hear from her, the whole issue of forward guidance. if you were still there, what would you recommend? how would you switch policy to get away from the 6 1/2 percent unemployment threshold? >> they've been burned. no other way to put it they've been burned on the 6.5% marker, whatever you want to call it, threshold and they'll back away from that. i would think that janet yellen would want to make maximum use

of what will be a honeymoon period. i don't think that anybody is going to be going really after her hard. it's too early to do that. and there's nothing really to pin on her if you will. i think everything will be lying low. >> sara? >> yeah, go ahead, steve. >> i just want to bring up this one issue out there about the statement. we know janet was the chair of the communications committee and is responsible for a lot of the new communications. this issue of 6.5% is one issue. here's another one. the statement's gotten to be nearly 800 words and i think there's general agreement around it's really too big to be useful and very communicative to the markets. at the same time yellin has pledged continuity. so there's a big question now whether or not she needs to shrink that thing down and say more with fewer words. >> can i just pick up on the point that you made earlier? that you think that obamacare is making the unemployment situation worse. you also believe that the lack

of permits, for example, for the keystone pipeline is holding back employment growth. >> right. >> if you follow through your arguments, do you believe that the long-term natural rate of unemployment in this country is higher and, therefore, do you think that the fed should be raising rates more rapidly than it otherwise would and not pushing so hard at something that it can't change in your view? >> let's talk about the what the natural rate means. the natural rate is, quote, unnatural really. it is determined by a lot of fiscal and regulatory matters. customs in the labor market. things like the minimum wage. things like the unemployment insurance system, sothose are a things determined by the government and congress and the administration and they can all be changed. they can all be changed -- >> but if they don't change that, what should the fed's response be to raise rates sooner than it otherwise would because there's no point the long-term rate of unemployment is higher for longer? >> at this point i think the

sensible thing for the fed is simply to recognize which i think the fed does, that the economy does not have a big boat burst of momentum behind it. it is growing slowly. it is growing. and they should simply be supportive but they can't get out ahead of things that really need to be changed by the administration. >> bill, i think one of the things simon's getting at here what is the gauge of how much slack there is in the labor market? if there isn't any slack, ie, the natural rate is higher and we're closer to it right now, then that suggests one route of monetary policy but if they point out there's a lot of slack in the economy, then policy should probably remain wide open? >> yeah. it's an ongoing question and we're going to continue to monitor, of course, the testimony. we'll bring you there live in just a little when she starts to take questions. bill poole, very valuable to have here inside the former federal reserve, and steve

liesman, as always, great to have you as well. let's talk retail. shares of best buy surging as they boost fourth quarter profit and courtney reagan joins us now with more. >> hi, carl. joly was on a good mood on the phone, the last time we spoke he referred to the challenging holiday season as a speed bump which he now says is in the review mirror. they say the company is assuming the industry declines in consumer electronics will persist, it's largely product driven. we see the decline in consumer electronics industry as a planning assumption and wouldn't be upset if it turned around wash but they are expecting revenue and same-store sales to be slightly negative with the assumption in place. increasing the cost-cutting plan to a billion dollars after exceeding its previous target. i asked him about the report

that 2,000 managers are being let go is part of the cost-cutting plan, but he said we are reorganizing the field with the focus on the stores and regional markets and simplifying the structure between stores and headquarters and the first place we look is nonsalary-related expenses, reducing head count is always a last resort. joly spoke mostly about best buy internals rather than focusing on the various external challenges but he did say that 300 stores were closed at least at some point in january due to the severe weather ten times the weather-related closures last year. he also noted there is economic uncertainty and said a rising tide may not lift us, we may have to walk to the top ourselves, carl? >> finally, jcpenney with the 2% comp. what does it mean? how stable are they now? >> we knew the 2% comp ahead of time, that was part of what they told us in their preannouncement about holiday sales. i think what we liked what the company said was about the gross margin improvement and the goals to get there even further in the future and also the comments about liquidity.

it should be on the back burner. we're okay now. we need to focus on day-to-day results and they also reiterated those comments about liquidity and free cash flow saying the turnaround could ramp up in 2014 and that means that positive free cash flow could be right around the corner so i think wall street likes all those comments. >> up $1.32 the best day for jcp in 46 years. >> not bad. >> thanks, court. >> thank you, carl. one reasons why the markets around the world are down today because of the ever tense situation in the ukraine. the country's acting president, the new president, is warning russia against any military aggression in its crimea region after pro-russian gunman seized a regional headquarters and parliament in that same area. nbc's jim maceda is live in moscow from where he joins us

now. i guess, jim, the central question that people are asking is whether putin will observe the territorial integrity of the ukraine as president obama asked him to do by phone a couple of days days ago. >> reporter: it's a key question and one we can't answer yet, but he does seem to be setting up a situation of this increased pressure on this new interim government. keep in mind that in kiev, the interim government was officially voted in by parliament so we have the former economy and foreign minister known both to the u.s. and russia, by the way, now ukraine's prime minister and think about his first full day. i mean, those russian-speaking commandos carrying ak-47s and sniper rifles storming the crimean parliament building. third still inside this evening. they've raised the russian flag over the building. police have cordoned off the area in crimea.

of course, an important russian enclave. the home of russia's black sea fleet. and now a pro-russian lawmakers we understand that they're going to try to have a referendum as soon as possible on separating from ukraine. meanwhile, there's vladimir putin's show of force, the surprise war games are in their second day. at least 150,000 troops of 900 tanks and some 200 aircraft and warships, they're all focused on russia's border with ukraine. so, there's real pressure there from russia. and, in fact, if it weren't enough to deal with now they have to figure out a way to get the nearly bankrupt ukraine back to solvency again. and, again, that's just day one. back to you. >> yeah, a lot of tasks ahead, jim. thank you for that, jim maceda in moscow tonight. still ahead, janet yellen will be answering questions from the senate banking committee in a moment. we'll bring you that live as soon as the "q" and "a" begins. but first, tim finchem will

join us live, as the honda classic is about to fire up. that's coming up after the break. [ male announcer ] these days, a small business can save by sharing. like carpools... polly wants to know if we can pick her up. yeah, we can make room. yeah. [ male announcer ] ...office space. yes, we're loving this communal seating. oh, it's great. yeah. [ male announcer ] the best thing to share? a data plan. ♪ new at&t mobile share value plans for business. our best value plans ever. for example, you can get 10 gigs of data to share. and 5 lines would be $175 a month. plus you can add a line anytime for $15 a month. sharing's never been better for business. ♪

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sponsorship on the pga tour for another ten years making it one of the longest sponsorship commitments ever for the pga tour. joining us exclusively is jay fishman and jim finchem joining us from hartford. good morning, great to see both of you. >> thank you. >> good morning, carl, nice to be with you this morning. >> jay, this is a big deal. ten years. why that kind of commitment? why now? >> well, i'm always fond of saying that this event works for us because we're a hometown company, hartford based, 7,000 people here supporting a home tounle town event, it's really old school pga tour and it's important to the community. it's important to our employees. it just -- there's no constituency here that doesn't thrive from it and so signing up for it, it's been great for everyone, great for us. so, let's keep going. >> tim, the kind of revenue you've been able to generate

under your stewardship, what does this mean? tim, you got me? i think they might have lost my audio which is too bad. the honda classic, of course, is kicking off in just a few days here. actually in progress. and tiger woods, of course, locking for a wlock ing looking for a win, a lot of attention on golf the bill in arizona where, of course, the super bowl may have been at risk. >> well, on arizona the nfl, the major baseball league and the nba all lobbied the governor successfully it turns out overnight to veto that bill which would have discriminated against the lgbt community. >> how would they have approached a question like that? i mean, the tour is -- the super bowl's a moneymaker but so is the tour. >> you also have the sort of controversy over the steve elkington tweet making a

comment -- >> i didn't know that. >> he made a tweet. can we bring him back and we can ask about him? >> can you hear me now? >> yep, we got you, carl. >> there you go. >> walk me through what this means to golf. >> well, carl, it's important to obviously hartford and to connecticut and the tournament here. we've had a great eight years with travelers. and i think the main message today is with the ten-year commitment, it shows that the travelers and the business community has a strong and very positive view of the future of the game, the future of our sport and that says a lot in the marketplace. so, from that standpoint it's very positive. and to continue this partnership with a sponsor that's very involved in the tournament really pushes the envelope to make it as good as it can be is also great. so, we are very, very pleased this morning. >> carl, golf is unique. professional golf is unique in that it's only the professional sport where 100% of the proceeds

go to charity. nobody else does that. over the seven years we've been involved here we've contributed over $7 million to local charities. principle beneficiary being hole in the wall camp for sick kids and it supported hundreds of charities along the way. good for golf. good for the community. good for the charity that we support. >> yeah, tim, our viewers always like to talk about the players themselves. how much depends on tiger's dominance? i think they might have lost me again. you can put a man on the moon as they say but it's hard to get a live shot going to hartford, connecticut. our apologies to tim and jay and, of course, the pga tour does return today to the golf channel and nbc. good luck to all the players. the honda classic begins 1:00 p.m. eastern on golf channel, continues saturday 3:00 p.m. eastern on nbc. janet yellen is set to answer questions on the economy in the senate banking committee in just a few minutes' time.

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tesla announcing plans for what it calls a giga factory for battery production. the company indicating that it will be built in the american southwest without specifying a great -- exactly where that will be. phil lebeau joins us now live from chicago. it's ironic, phil, because about a week ago you were reminding us all that tesla had access to money if it needed to and didn't need to do a deal with apple. >> yeah, and now look at what they are doing raising money with a convertible offering that will go towards the new giga factory and as they expand production for future generation of tesla. the giga factory is about expanding production so that

they can build more vehicles. they need to lower the cost of the battery packs for the mass market car that's coming up in three years. that's the key here. if they don't bring the cost down, it will be tough. 6,500 jobs will be added with this giga factory. a capacity to build a half million lithium-io bn batteries and full production by 2020. for elon musk he's putting $2 billion from tesla into this giga factory $1.6 billion coming from the convertible offering that they've announced but the location that will be picked this is the most intriguing part of this story right now. there are four states that are listed by tesla as possibilities for the location of the giga factory. they are nevada, arizona, new mexico, and tesla. all of them are in the running to ultimately build these batteries and then shipment them to fremont, california, where they will go into the cars.

because it does not allow direct sales of automobiles in that state. basically it's a law stopping tesla from sells its vehicles directly in texas. think about this, guys, if you are a lawmaker in texas and you have the possibility of landing a major manufacturing plant and 6,500 jobs, do you change that law? i'm sure that's going to be one of the political calculations that's going to be discussed frequently over the next several months as tesla narrows down where it will put this giga factory. >> phil, it's david. this is no small undertaking including how much energy apparently is going to be needed at the factory. i would assume that may also figure in to their decision where you can use wind power or whatever, solar power, whatever it may be. >> a lot of it is coming from wind and solar. they want a big footprint in terms of area for locating this facility. they'll have a huge solar plant there and a wind generation plant there. so, that that's going to be

putting a lot of the energy into the plant and they're also going to be recycling lithium-ion batteries, this is a huge undertaking. it's not like saying let's put an assembly plant down the road in this part of town. it's going to be a very big investment. >> we'll see what the dealer networks have to say about it, phil, as you pointed out. as you pointed out, phil, in chicago. let's bring in steve liesman back at headquarters. >> hey, carl, thanks very much. the testimony was indeed identical but somewhere in the middle she appears to have had a discussion sense she said since the last appearance the data has been softer and the number of data releases have pointed to softer spending and they're going to be attentive to how much of this is the weather, but hard to tell right now how much of the recent weakness is weather. she is currently right about finishing up right now her testimony to the senate which was, again, identical but added those comments about the weather and the data being softer recently, gives. >> all right, steve, thank you very much. as you can tell the "q" and "a"

session with yellen is beginning right now. let's listen in. >> the congress has assigned to us of promoting maximum employment and price stability. inflation is running well below our 2% target. and as you indicated, that gives us ample scope to continue to try to promote return to full employment and we're committed to doing that. >> chairman yellen, what approach has the fed taken with respect to insurance companies under the new rules implementing second 165 of dodd/frank? how would this interact with rules and capital requirements for insurance companies under the colin amendment? >> senator, we are looking very carefully to design an appropriate set of rules for

companies with important involvement in insurance. we recognize that there are very significant differences between the business models of insurance companies and the banks that we supervise. and we are taking the time that's necessary to understand those differences and to attempt to craft a set of capital and liquidity requirements that will be appropriate to the business model of insurance companies. i would say, however, that the collins amendment does restrict what is possible for the federal reserve in designing an appropriate set of rules. so it does pose some constraints on what we can do. and we will do our very best to craft an appropriate set of rules subject to that constraint.

>> in what ways could the s-soc make the designation process more transparent? >> so, on this one, senator, i would say that i think fsoc really has provided the public with a good deal of information about the criteria that it's using, the general criteria that it has established for attempting to determine whether or not an institution, an organization, should be designated as a sifi and in the cases of those organizations where it has made a designation, it's really provided a wealth of information about those organizations. there are also opportunities for companies that want to contest designation to have an appeals process.

so, there is really a well worked out process. as the fsoc goes on to consider other possible firms for designation, if it decides to use a different set of criteria, i think it's completely appropriate that the fsoc should also make clear if new criteria are being used to govern designations. >> how has the recovery impacted wages and income inequality? and if so, what can congress do to address this major problem? >> well, senator, i think the issues of income inequality, of rising income inequality in this country, really date back many decades probably to the mid-'80s

when we began to see a very substantial widening of wage gaps between more skilled and less skilled workers. and this is a trend that unfortunately is continued almost unabated for the last 30 years. economists have debated exactly what the causes are, but technological change in globalization play a role. however, i think it's clear that the recession has placed an extremely high toll particularly in special burdens on lower income workers. those workers and less educated workers have seen their unemployment rates rise disproportionately during the downturn. and so households and segments of our population that had already been suffering stagnant

or declining incomes for many years have seen the recession take a large toll. so, there really has been a very large burden. and it is our objective to try to get the economy back to full employment to alleviate that portion of the burden. things like education and training i think are on every economist's list of actions that congress could take. early childhood education, training more generally, those things certainly and others congress could consider to address these important issues. >> senator? >> thank you, mr. chairman, and chairman yellen, welcome to the committee. >> thank you. >> i appreciated your comments a couple weeks ago to the house financial services committee -- >> getting breaking news this morning let's get to scott cohn.

>> a quick update, carl, on the situation in ukraine and particularly the request that you saw on your screen a little while ago from the ukrainian government to the imf for assistance. confirmed by imf director christine le gaarde. they've wrapped up a press briefing about it and what they are saying is they are sending a team now to ukraine to meet with the interim government to make assessments on whether they should qualify for assistance, while stopping short of endorsing or backing now this new -- this new government and discounting the claims by victor yanukovych that he is still the legitimate leader, the officials at the imf said they are encouraged by the new government's statements that they are committed to reform, the reform that the imf would require before granting the assistance and the statement said that they are encouraged by the many expressions of support among international partners so we're continuing to follow that. back to you.

>> all right, we'll have to see what those conditions are for the package. scott cohn, thanks. want to take you back to washington, janet yellen, testifying before the senate finance committee. >> in terms of bringing private capital back into the market, we now have a system where almost all mortgages that are being granted in this country have government backing associated with it. and i think to see private capital return in meaningful amounts to the mortgage industry, clarifying the rules of the road, is important, so i would certainly urge congress to proceed in this area. >> thank you. i agree with you and appreciate your ob soichings servations at. as i said in my opening statement i'm very concerned about dodd/frank implementation and i hope you would communicate with congress if there are statutory ambiguities or

obstacles that would keep the fed from doing the right thing. when chairman bernanke was before us last year i think it was, i asked him this same question. but i'd like to know if you agree with him that the areas of the end users, swaps, push-outs and reducing the regulatory burden on community banks are areas in which we need additional statutory attention to getting it right? >> so, the three areas that you mentioned are ones that are high on our list of concerns, areas that we are looking at ourselves, and as we design the dodd/frank, you know, regulations, in all of these areas we are doing our very best to address in these areas you've mentioned issues that have been raised and that we consider quite appropriate.

it makes sense to me that congress should consider these areas as well. i want to assure you that we will do our best in writing regulations in these areas. however, to address the concerns that have been raised. >> well, thank you. and i appreciate your attention to it. i also believe that you need additional clarification and strength in the statute to do it right. and i hope that we'll be able to provide that from congress. next, in numerous hearings last year it was revealed that we need better international coordination on cross border issues to ensure that there are no undue interruptions in the financial system. immediately after the fed finalized its section 165 proposal for foreign banking organizes last week, european commissioner issued a statement that the fed's rule conflicts with the international standards on cross-border cooperation in

bank resolution. what concrete steps are you taking to ensure effective coordination with your foreign counterparts to create a complementary regulatory regime? >> well, cooperation with our counterparts globally has been a core part of our approach to strengthening the financial system and putting in place regulations under dodd/frank. so, we are very actively engaged through the financial stability board, through the basel committee, through the relations we have with insurance regulators attempting to craft regulations in all areas that are consistent globally and that mesh together as a successful system. in the area of foreign banking organizations in our rule writing which we finalized, i

guess week before last, on section 165, we faced important trade-offs. the role of large foreign banking organizations in our capital markets has changed dramatically over the last 20 years. these organizations are among the largest and most systemically important organizations in the u.s. financial system. and we try to write a set of rules that provide a level playing field for both u.s. organizations and foreign banking organizations doing business in the united states. and the rules that we put in place i believe are really quite similar to what our own banking organizations faced when they do business abroad. so, we have tried to construct a set of rules that preserve the

opportunity for cross-border international global capital flows, branches and agencies of foreign banking organizations can continue to operate with that separate capital requirements in the united states. but it was important to put in place a set of rules directed to financial stability of our own markets. >> thank you very much. >> senator reid? >> thank you very much, mr. chairman, and welcome, madam chair. the open market committee has at several times made the point that we seem to be operating at cross-purposes. as the federal reserve is pursuing an expansive monetary policy, we're pursuing a very restricted fiscal policy. it would seem to me that if we were in harmony or complementary it would be better for the overall economy. there are several examples. our current debate about

unemployment compensation. most object observers suggest it could add 200,000 jobs to our economy at the same time helping people who need help. we're in the throes of trying to figure out if we're going to actually fund our highway system after next september which is, again, another example of how fiscal policy could aid your efforts. could you comment on this apparent cross-purpose activity? >> so, fiscal policy really has been quite tight and has imposed a substantial drag on spending in the u.s. economy over the last several years. the cbo estimated that last year the fiscal policy drag probably subtracted a percentage point and a half from growth. the drag is likely to lessen

substantially during the current year but nevertheless there remains some drag. and, of course, it is true that because there has been fiscal policy drag, the burden on monetary policy has been larger. this is true not only in the united states but in a number of advanced countries in europe and in japan as well. my predecessor has always urged congress recognizing that there are substantial long-term budget deficit issues and a need for a sustainable fiscal path for the country to focus to the maximum extent possible on fiscal changes that would address the longer-run issues that will be associated with a rising debt-to-gdp ratio over decades and to try to avoid doing harm to the recovery, and i would

take the same general position. >> but in the short run, there is a value of additional fiscal stimulation in the economy that will complement what you are already doing and also make it easier for you to begin to withdraw the quantitative easing. is that a fair comment? >> well, i do think the economy is beginning to recover and we have made progress. and, you know, at a minimum i would hope that fiscal policy would do no harm. >> just one other quick question. you have and your predecessors have looked at the unemployment rate of 6.5% as sort of a point of inflection if you will. but one of the aspects of the current unemployment situation is that the labor force participation is falling. and so that 6.5% might not actually capture sort of the reality of the current economy and be an adequate sort of

measure when you should begin or how you should begin to undertake fiscal easing. quantitative easing, excuse me. so, are you looking at other ways, or are you looking beyond just a simple unemployment rate to gauge your actions? >> so, senator, let me first say that 6.5% unemployment is not the committee's definition of what constitutes full employment. the range of views on that among committee members is substantially lower. the central tendency is, you know, under 6%. so, 6.5 was simply meant to be the committee saying, look, if the unemployment rate is above that, we see absolutely no need to consider any possibility of raising rates. below that we begin to look more carefully. and as we do so, of course, the

unemployment rate is not a sufficient statistic to measure the health of the labor market. an additional 5%, an unusually high fraction of our labor force is working part time for economic reasons which means they're unable to get full-time work but want it. that's an additional 7 million-plus americans who are involuntarily employed part time. and we have unusually high fraction of americans who are unemployed and have been for substantial amounts of time. so, you know, as we go to a fuller consideration of how is the labor market performing, we need to take all of those things into account. >> thank you, madam chair. thank you, mr. chairman. >> senator shelby? >> thank you. thank you. chairman yellen, for being here with us and congratulations.

i want to talk to you a little bit about the portfolio of the fed, it's been mentioned. i understand it's $4 trillion at the moment. you tapered off some of the fed board of governors. you are still buying at the current rate by $65 billion a month. so, at that rate if you don't taper substantially or stop, you'll be getting up toward $5 trillion in the year more or less. is that correct? >> we are, as you say, we are around $4 trillion -- >> getti ting up to $5 trillion the rate you are buying. >> if we don't continue to taper. >> even if you taper and you continue to buy, like, if you taper down from 65 to 50, that's still substantial buying in the market, is it not? >> it is. i mean, we've indicated that if the economy progresses as we

anticipate -- >> sure. >> -- that we expect to continue reducing the pace of purchases in measured steps. which would mean ending completely the purchases winding down and ending sometime next fall. >> in your portfolio, there are mainly treasuries and mortgage-backed securities. >> yes. >> is that what the portfolio consists of? >> yes. >> what is the ratio of that one to the other, relatively, just educated guess? >> i believe we have a larger quantity of treasuries than mortgage-backed securities. >> can you furnish that? you want to look at it or furnish it for the record? >> i will be happy to furnish the exact numbers to you for the record. >> to unwind a portfolio of that size, which is unprecedented, chairman bernanke has told us before it would be a big challenge. do you agree with that?

>> we do not need to and have no intention of quickly winding down that portfolio. >> will you -- will you -- is it your plan to keep some of the mortgage-backed securities and treasuries for maturity? >> so, we have indicated that we have no intention of selling mortgage-backed securities. they will -- i think when we begin the process of normalizing monetary policy, of wanting to tighten monetary policy, we are -- we will have a look at permitting runoff out of our portfolio as these securities mature. and allowing runoff, would bring down our portfolio over time. >> slowly. >> slowly, even without sales.

and i think my predecessor has emphasized, and i agree, there is no need to bring down the size of our portfolio in order to tighten monetary policy. we have a range of tools that we can use to raise the level of short-term interest rates at the time that the committee deems it appropriate to begin to tighten monetary policy conditions. now, that's a way off. but we continue to develop tools to make sure that we have an arsenal of tools to be able to, as appropriate, tighten conditions. and not have to do asset sales or manage our portfolio in any way that would be disruptive to financial markets. >> if i can shift now to the regulatory side of your duties here as chair of the fed board of governors.

basel iii is supposed to be in effect, is it not, in '15? is it 2015? a lot of them have got to make those adjustments for capital -- >> i believe so. >> -- flexibility of capital liquidity so to speak, is that correct? >> i believe so. >> now, will -- senator crapo mentioned the foreign banks and so forth. will you as regulator make sure that the foreign banks comply with their capital standards just like our banks have to if they are doing business in the united states of america? >> yes. we have said that foreign banking organizations that have over $50 billion of -- in size will have to form intermediate holding companies and to organize their activities other than branch and agency activities in an intermediate holding company that will be subject to the same regulations

as u.s.-based banking organizations. that's the essence of the proposal that we finalized -- we finalized two weeks ago.ago. >> thank you. my time is up. >> senator schumer. >> thank you. and thank you, chair yellen. you're off to a great start, as far as i'm concerned. i just want to make one brief comment. i know that some of my colleagues on the other side of the aisle express amazement that the fed would take extraordinary measures to boost growth. but if congress had been done more on the fiscal side to deal with the damage the economy suffered, the fed wouldn't have to do this and yet some of the very same senators and congress members who block all further needed investments in infrastructure and other things that used to have broad bipartisan support complain that the fed is doing too much to help the economy and it's sort of incredulous to me. you don't have to comment on

that. but what do they expect you to do? stand here and let the economy get worse? let job growth continue to slow? fiscal is preferred but it's not available because people have blocked it. my question, first one relates to tapering on the economy. i know you testified you were surpris surprised, those were your words, by the data in the jobs reports in december and january but indicated the time the fed had no intention offal terning its tapering program despite the fact that the economy may not be showing the growth you originally anticipated. in your analysis of the data since then, have you seen any trends or additional information that has led you to reconsider slowing or pausing the tapering of the fed's bond buying? >> well, senator, as i mentioned in my opening remarks, we have seen quite a bit of soft data over the last month or six weeks.

it was, you know, the employment report relatively low, below expectation growth in payrolls and some of the housing numbers and retail sales and industrial production. it's really quite a range of data that has been soft recently. i think it's clear that weather has played unseasonably cold weather has played some role in much of that through many ways in which weather would have affected these series. what we need to do and will be doing in the weeks ahead is to try to get a firmer handle on exactly how much of that set of soft data can beks plabe explai by weather and what portion is due to softer outlook -- >> if it's not mostly weather would you consider pausing or changing the rate of tapering?

>> so as we have said in our statement and i would agree, asset purchases are not on a preset course. so if there's a significant change in the outlook, certainly we would be open to reconsidering. but i wouldn't want to jump to conclusions here. >> my next question dates -- talks about some of the qualitative versus quantitative guidance. fed reserve president lockhart said recently, for the next couple of years, forward guidance may be the lead policy tool. arguably the most potent method we have for influencing financial conditions and economic results. i appreciate the fed's use of forward guidance is another tool to influence market conditions but i would like to get your thoughts on how it can be most effective. based on the minutes of the last meeting it seems the fmoc had significant discussion about revising down the fed's forward guidance which originally stated it would consider raising

interest rates once employment fell below the threshold of 6.5. in our testimony before the house you indicated earlier this month that the 6.5 threshold would not be the only factor that's taken into account. polymakers would being looking at what you call a broad range of data on labor market creation and other indications. it seems you're inclined to offer a more qualitative approach. given the stated importance of forward guidance, which it is these days more than ever, and the reality that to be effective the guidance must be trusted by market, would you agree with president bullard who said he would favor discarding num tral thresholds and much more work toward the more qualitative approach which would give you more flexibility and yet still give the markets guidance? >> so there are many different views on our committee about what the right way is to cast forward guidance.

and this is something that we have been debating for a long time and will undoubtedly continue to discuss as the unemployment rate gets closer to this 6.5% threshold. i think we have already clearly indicated, and i emphasized in my testimony, that the unemployment rate is not a sufficient statistic for the state of labor market. there is no hard and fast rule about what unemployment rate constitutes full employment and we need to consider a broad range of indicators. many members of the committee have emphasized this point and it's one i agree with it moves in the direction of qualitative guidance. on the other hand, we do want to give markets as much of an indication of how we expect to conduct policy as we can. we did provide some additional

information in december which we reiterated in january. what we said was that the committee based on its full assessment of all of the data on the labor market and inflation pressures and inflation expectations, financial developments, taking all of that into account, we believed that we could only begin to raise our target for interest rate well passed the time that the unemployment rate had declined below 6 1/2% and we said that this was true, especially if inflation remained low because an important factor is that inflation is running well below our 2% target. so i guess this is qualitative guidance but i feel that what we provided then was additional information. >> away from a purely quantitative measure and moving more towards the qualitative, which i think is a good thing. thank you. >> senator corker? >> thank you, mr. chairman --

>> talking about the fed's portfolio, the effect of weather. the unemployment rate of 6.5%. steve? >> she's holding the line on keeping the taper. she said only a significant change in the outlook. last time she said notable change in the outlook. i'd like to point out that she did mention what we talked about earlier, the idea of to kifocusn people working part time because of economic reasons as one measure she's following to figure out how much slack there is in the labor market because that 6 1/2% unemployment rate has gotten to be unwieldy for the federal reserve. >> back to yellen with senator corker. >> i think you may have had something to do with him being nominated. i think the former chairman may have had something to do with that. but very impressive person and i think he's a very good complement to your background. so i'm glad that he's being put forth and look forward to him being confirmed. you and i, when we were having a confirmation hearing talked a

little bit about financial instability in the hearing. and i know there's been a lot of discussion about -- about inflation and concerns. i know senator shelby asked you some questions about quantitative easing. but we addressed in your confirmation process the concern about markets overheating and long-term 0 interest rate policy may be the threat on the front end is an inflation, maybe it's instability in our financial markets. and i'm wondering if you've seen any signs of that, if you've refined any thinking about how you might address that should that occur. >> well, senator, i agree that environment of low rates, low interest rates, especially when it prevails for a long time and we have had a long period of low interest rates, can give rise to behavior that poses threats to

financial stability. and, therefore, we need to be looking at that very carefully. and we are doing so in a very thoroughfare way, i believe. there are a number of things that we are monitoring. measures of asset prices and whether or not they appear to be diverging from historical norms, namely it's hard but we're trying to spot any asset bubbles, price bubbles that might be emerging. we're looking at leverage which build up in leverage can be very dangerous to the financial system and pose stability risks. we're looking at trends in leverage. we're looking at credit growth to see whether or not that has potentially worrisome trends. in addition to that, we're looking particularly through our

stress tests, at financial institutions and a low-interest rate environment. we have to worry about whether or not they're appropriately dealing with interest rate risk. we have been looking at that and, in fact, our current stress test includes a special portion related to -- >> as you're looking -- i'm going to run out of time and our chairman is very punctual. have you found anything yet that gives you concern, and do we have -- do you have a tool with this 0 interest rate policy to address that if you do? >> i would say at this stage, broadly, i don't see concerns but there are pockets, a few things that we have identified that do concern us. for example, underwriting standards and leveraged lending clearly appear to be deteriorating. we have addressed that with supervisory guidance and special

exams and we'll continue to be very vigilant in that area. that's worrisome to us. there are a few areas within asset price valuations, broadly speaking. i wouldn't worry but there are a few areas where i would be concerned. many people have emphasized farmland is a concern, farmland prices. so there are a few areas. we have regulatory and supervisory tools. to me, they should be the first line of defense. but i don't rule out monetary policy. >> if i could, thank you very much for that detailed response. we were just in london meeting with regulators there. i know there's a large concern about balkanization of our markets. and i know there was some discussion about trying to discussion that with the eu/us trade agreement. i know they're not interested in that but i want to raise that issue because it does need to be

addressed and i think the fed will take a major lead in that. the final point, in orderly liquidation that we're entitled to was put together and i think a lot of us worked on together and i'm proud of that title ii and it's not exactly the way any of us would like for it to be. but one of the things, even though it was orderly liquidation, i think the fede l federal -- fdic realized when they went through the process, these entities are so intertwined, there's really not a way to orderly liquidate. so instead they're coming in through single entry to the holding company. one of the things that i think all of us have concern about is making sure, if we're going to use that process, and i think it's sound personally, that we ensure there's enough debt at the holding company level, otherwise there will be other kinds of distortions.

where is that right now and when are we going to come up with a ruling that gives clarity so that we know absolutely we have things in place should a large institution fail? >> so i agree with you that this is extremely important. it is high on our list. we have been working globally with other regulators and looking ourselves at a requirement that holding companies have a minimum amount of long-term debt that would be loss absorbing, that would permit an orderliy liquidation. we would need enough long-term debt to both absorb losses and also recapitalize a company in a title ii liquidatioliquidation. and we're looking to come out with a rule that would require that. we're working with the fdic on this. >> thank you, mrs. chairman. i hope it's a very large amount of debt held at the holding

company level. thank you. >> i agree. >> senator menendez. >> thank you, chairman. let me ask you, the number of long-term unemployed americans has continued to go down but it's still exceptionally high by historical standards, over 3.6 million. as you know, long-term unemployment can have serious consequences for individuals and their families and can permanently impair the growth prospects of our economy if workers are stuck on the sidelines too long and their skills and networks become out of date. do you feel that the fed's policies have been successful in helping to reduce the number of long-term unemployed americans? is there anything more that the fed can do or is there congressional action that you might believe is necessary in order to meet that challenge? and is boosting demand the best way to reduce long-term unemployment right now based on our current economic conditions? >> well, senator, we are very focused on and concerned about

the high level of long-term unemployment. it's really unprecedented to see something like 37% of unemployed in long spells. i mean, what can we do? we can try to foster a stronger labor market generally. we don't have tools that are targeted at long-term unemployment but in taking account of how much slack there is in the labor market and attempting to stimulate demand so that there's more spending, there's more production, and more jobs in the economy, we have seen long-term unemployment edge down. very slowly, it's taking a long time for those people to be reabsorbed into the labor force. but our approach is to foster a stronger recovery and try to get the economy back to full employment. and i think they will see gains.

>> so if increasing demand is part of it, is there anything else that you think that the congress, maybe not the fed, should do in order to achieve getting those numbers historically high numbers down even quicker? >> well, i think it's also appropriate for congress to look at what some of the special needs of long-term unemployed are. these are spells that are very damaging to families, put great burdens on families, both in terms of income and even health burdens that -- burdens on children and marriages. and so i think it certainly is something that congress could look at along with us. >> is skill sets helps individuals with their skill sets something that we should be considering? >> yes. i mean, sometimes long-term unemployed do need to acquire different skills in order to be reabsorbed into the job market. >> i know chairman johnson asked

you a question on income and wealth equality. and i want to follow that up in terms of monetary policy decisions. over the last 20 years the top 1% of earners has grown by more than 86% while incomes for the remaining 99% have grown by less than 7%. even during our current recovery from the financial crisis, the top 1% have received 95% of the income gains over the last three years while real medium income is below 1990 levels. so, of course, we all applaud those who achieve financial success and we are thankful for that. but we're concerned the vast majority of people in our country feel they're not sharing in the economic growth. and when widening income and wealth disparity make it harder for ordinary working families to

move up the economic family, as shown to be the case, it creates a greater challenge to our overall economic well-being. so my question is, how does the fed account for income and wealth inequality and monetary policy decisions? for example, the fed is looking at broad statistics like gdp but economic growth is only accruing to the small share of the population while the rest feel they are still in a recession, is that something that the fed would wait long until broader based growth take place or is there a broader range of statistics that the fed should be considering? >> well, i think that the trends that you have described in detail are extremely disturbing trends with very significant implications for our country. and i am personally and the fed is very worried about these trends. the major thing that we can do

is, as we try to assess the state of the labor market and appropriate policy to look at a very broad range of statistics and metrics concerning the labor market, not just the unemployment rate, but in particular other measures that suggest that the labor market is not functioning properly. the fact that we have seen very slow growth in wages, for example, i take is one of many pieces of information suggesting that the labor market is not -- has not returned to normal and has quite a ways to go. and it's something that's appropriate for us to look at as we consider appropriate monetary policy. >> so you're looking at a broad -- you'll look at a broad range of factors as you are making your decisions? >> absolutely. >> all right. thank you, ms. chair. >> senator? >> thank you, mr. chair.

. and thank you, madam chair, for being here and for your work. as you know many of us certainly including senator brown and i, are concerned about a capital requirement at the biggest banks. can you confirm that u.s. regulators are close to finalizing the supplementary leverage ratio that would impact that and, if so, when do you expect that final action to be taken? >> so this is high on our regulatory agenda for this coming year. we have out an initial proposal on this. and while i can't give you an exact time, we will certainly be working with the other agencies to finalize that. >> can you give us an exact time frame, a general time frame when you would expect the fed to act?

>> in the not too distant future, i would say. >> okay. according to the "wall street journal," vice chairman said that regulators are unlikely to change draft proposal william regard to a 5% capital buffer against all large bank assets and a similar 6% buffer at their insured deposit taking subsidiaries. in contrast to that, there has been concern that you might follow europe's lead in watering down some other provisions from the initial draft concerning things like weaker treatment of derivatives and valuation of repurchase agreements. can you give us any insight into where those things stand in your discussions? >> so, i mean, let me see if i understand what you mean here. i mean, we came out with a

proposal for the 5% and 6%. >> correct. do you think there's any chance that will change in the final action? >> i mean, this is something we've been quite supportive of and i'm not envisioning -- >> okay. deeper in weeds, if you will, there has been some suggestion that you could back off some other elements of the draft, for instance, on issues like the treatment of derivatives and valuation of repurchase agreements, do you think that is any possibility? i would hope not. i think there are others on the panel who would hope not. i would encourage you to not weaken any elements of your draft. but is that under discussion? >> i'm not -- i'm not aware if it is under discussion. i would have to look into that. but my objective would be to come out with a strong proposal. we have increased greatly risk-based capital requirements

in light of that, increase -- i see leverage and risk-based capital is sort of built-in suspenders. it is definitely in my view appropriate to increased leverage requirements more or less in line with risk-based capital requirements. >> right. >> and -- >> i would just encourage a strong final set of proposed -- or set of rules as strong or stronger than the draft. i would just encourage that. let me move to one other topic i wanted to hit. and this is actually related to this too big to fail issue which capital requirements are also about. a lot of us have a concern about the squeeze that community banks are getting in the financial sector. that has been a historic long-term trend. it has gotten even a lot worse

since the '07-'08 crisis and since -- and i would argue, in some cases because of dodd-frank. so it's going from bad to worse in terms of a trend. if you look at federal reserve board membership, there's also a trend and it is a way from representation of any community banking or community bank supervision experience. let me just put a chart -- the chart is up. this shows. it's a little busy. it's color-coded. this shows sort of the make-up of federal reserve board members over time. and any community bank and community bank supervision experience, which is the yellow, is limited and there's been a huge growth over time in terms of folks with a pure economics and academic background. in particular right now, there's

one person with that sort of community bank or community bank supervision experience. and she is leaving. so soon there will be none. what uwould your thoughts be about a requirement to have at least one person in the future with that type of community bank or community bank supervision experience? >> so i've had the privilege of working with governor raskin and previously governor duke and i can certainly say that they onl made huge contributions in the community banking area, and the background that they were able to bring was extremely helpful to us in crafting regulations and approaching our supervision responsibilities with sensitivity to this special issues that community banks face. i hope the administration would consider an appointment of

someone with that kind of experience and i can certainly attest that it's very helpful to us in doing our work. >> great. thank you. thank you, madam chair. >> senator brown. >> thanks. madam chair, welcome. >> thank you. >> we're thrilled that you're here and thank you for your public service up to this moment and your continued service. thank you -- i thank senator vitter for his comments and questions about capital standards and appreciate your answer and urge you as quickly as possible with occ and fdic to move as quickly as possible. thank you for your response to me about the real economy in your confirmation hearing last friday as the board released tran transcripts of the 2008 fmoc meetings. the reading was interesting for us who mind this mission. fight inflation, maximizing employment, but according to "the new york times" at that september, the crucial probably

most important of those september meeting on the eve of the lehman bankruptcy fmoc members mentioned, according to the minutes, inflation 129 times and recession 5 times. you speak forcefully and have for some time about the potential tletsz about the broader economy. this implies that the institution overlooked what was happening on main street during this critical time. now that you're chair, convince us that we won't see meetings like that where the emphasis is so much more on inflation than full employment because their focus will be more on ordinary americans that bear the brunt of this economy. >> well, i think, as you know, the fed's dual mandate very seriously. and i believe we should be focussed both on inflation and on unemployment. but i -- to just try to, myself,

put the 2008 situation in context. if you think about what happened within months of that september meeting where perhaps people did not realize just how serious the deterioration in both the financial markets and the economy was about to get within days or months of that meeting the most incredible array of programs had been ruled out by the federal reserve to address deteriorating economic conditions in alphabet soup of programs to support credit, the availability and extension of credit throughout the economy to provide liquidity not only to banking organizations to markets that were really finding themselves deprived of it.

by december of 2008 even with all the mentions of inflation that you noted, the fomc had certainly changed its focus and, in december, lowered the federal funds rate to zero. so i think i was one of those who was urging more, faster, we need to get on this but within three months a great deal had been done. and since then, we have been trying to do it. so in some sense i think the fed has responded. >> and you, i mean, to your credit, you look better in those minutes than some of your colleagues did. but that's the past and you look to the future. i want to follow up on some of the too big to fail questions. in november you said too big to fail is among the most important goals of post-crisis period. you have living wills and the

authority to break up institutions if they pose a grave threat to the financial system. despite all that the nation's foremost expert on banking regulation, your once fellow governor dan turillo said on tuesday we're not even close to end too big to fail. it's been five years since the crisis. you have the tools as the new fed chair. why is it taking so long and when is this going to be resolved? when can the financial -- when will america's financial community and american people know that too big to fail has actually ended? >> well, i'm slightly surprised you said we're nowhere close because i personally think we've made quite a lot of progress in putting in place regulations that will make a huge difference to this. even in orderly resolution, i think it's important we were just discussing the long-term

debt requirement. forming obstacles to resolving failing firm, having to do, for example, with cross border resolution issues, how to deal with the fact that foreign laws in foreign countries could make it impossible, you know, could precipitate the ending of contracts that would cause a disorderly failure of a firm. but we're working very closely with our foreign counter parts to try to resolve these issues. and you gave a list of all the things or some of the things that we have on the drawing board that we're hoping to finalize within months or during this year. beyond that, we're working on shadow banking, our stress test capital in the banking system, the highest quality capital has doubled since the crisis. and i personally think we are making strides.

and i'm completely committed to seeing this agenda to fruition. and i'm more encouraged about the progress that we're making. i'm committed to completing this. >> thank you. one last comment, mr. chair, i apologize. quick accelerating the rules on -- that you and fdic and occ without diluting those rules is a really important, not just substantive thing to do but really important message to the financial community and to the public, that you really do mean it and you mean business on this and you really do want to end too big to fail. >> absolutely. agree with you. >> senator heller? >> thanks for listening. thanks for being here. being patient. and taking our questions. i know as a former chair for the san francisco federal reserve you have a pretty good understanding of the state of nevada. and its current economic

conditions. it's been over five years now that since we've had this economic collapse. i want to take a quote from the president of the st. louis reserve federal reserve that recently said that we are a lot closer to a normal economy than we've been in a long time and i would stress that i can tell you right now nevada's nowhere close to a normal economy. maybe some parts of this country are having recovery but nevada's unemployment is second highest in the nation and many homeowners are still under water. >> i know that. >> i guess the question is, do you have the struggle that we are currently experiencing, is this a new normal according to the president of the -- president of the st. louis federal reserve or a new economic reality? >> well, i mean, as you know, senator nevada has one of the

hardest hit. it had one of the biggest booms in housing and -- >> 28. >> about the biggest bust of any market in this country. and i'm well aware it's in an unusually large share of homeowners is under water. the recovery -- you know, the prices have come up and they're coming up in a way most rapidly in some of the areas like las vegas where they fill the most. it is still going to be a long slog before things are back to normal in the housing market. in nevada and hard hit areas. prices are moving back up. we see investors coming in and, you know, buying homes and converting them to rental housing. but credit is really hard for many families to get. the ability to have home equity

loans when it's been wiped out and that's -- unfortunately nevada is one of the states that's been most badly effected. >> time frame for a new normal or a normal economy? >> some years, i think. >> several years? >> can you give me what your definition of full employment is? >> to me, it is a state of the job market in which people are able to find in a reasonable period of time jobs for which they're qualified. and there's no single metric i would say that would enable me to tell you when we have reached that. i would look at a broad range of indicates of the labor market, the unemployment rate if i had to choose one metric, the unemployment rate is probably the best. and members of our committee

aren't certain what constitutes full employment but a range of 5% to 6%, in that area, to be a state of full employment in the economy. but also looking at part-time employment job flows c sflows, happening with wages and a broader set of metrics i think is necessary. >> what is real unemployment today? i'm not sure exactly -- some of the broadest measures of unemployment like u-6 which includes marginally attached workers and those who are part time for economic reasons, namely they can't find full-time work, around 13%. >> 13%. the congressional budget office recently reported that president obama's proposal to raise the minimum wage would eliminate

half a million jobs. some believe they are low-balling this figure. and i know that it's your job at the fed to maximize employment. i'd like to hear your thoughts on this soft economy and the impact of raising the minimum wage. >> well, i think almost all economists think that the minimum wage has two main effects. one is to give higher wages to those who continue to have jobs and were earning the minimum wage. and then second, that there would be some amount of negative impact on employment as a consequence. and there is considerable debates about just what the employment impact of it would be. cbo is as qualified as anyone to evaluate that literature, and i wouldn't argue with their assessment. i mean, there are a range of

studies and they cited them but i wouldn't, you know, i wouldn't want to argue with their -- they're good at this kind of valuation. i think they also, i can't remember the numbers involved, but indicated that a large number of individuals would see their incomes raised as a consequence. i think that's the tradeoff. >> doctor, thank you. my time mass run. >> thank you, mr. chairman. >> senator? >> thank you, mr. chairman. i want to welcome chair yellen. thank you for putting yourself forward for this job and congratulations on a historic confirmati confirmation. >> thank you. >> we were able to visit about a number of issues. we're going to visit about them again, end users. one of those issues that we discussed clarifying the end user exemption from the margin that was included in dodd frank given the minimal risk they pose to the system. as you know, we have visited chairman bernanke, your pre predecessor, and governor

turillo, given the lack of systemic risk posed by end users but concern about the ability's fed to achieve that intent. issued back in 2011 there's been a number of additional developments including most notably the financialization -- >> just a quick interruption. a little bit of a disagreement apparently between a couple members of the fed where senator brown quoted dan t saying we're nowhere near ending too big to fail and janet yellen saying i disagree with that. i looked it up. i didn't see him say nothing where near. he said we made progress in any too big to fail but hadn't completed it yet. that's just one fine point. finally, earlier, janet yell listen, somewhat surprisingly, couldn't answer the question about the fed's ballooance shee. 60% treasuries, 40% mortgage backed securities. buying more treasuries than mortgage backed securities. i'm not hearing her give any

real new guidance at all on monetary policy. only that the fed will continue to figure out which part of this is weather, which part is not, and it's a determination that will be made later on in the spring perhaps. but also that the idea that the economy is much softer, something that is high on the radar but the taper would continue. let's go back to the conference. >> and the final rule released last week, section 165 of dodd frank, the fed declined to imply the rule to nonbank financial companies. at this time it indicated a desire to basically tailor this rule. can you tell me more about what the fed has in mind with respect to the tailoring? >> so we understand that the business models of insurance companies are quite different than those of banks. that there are a number of ways the asset liability matching

separate accounts and so forth that require tailored design of capital and liquidity requirements so they're appropriate to those business models. and we're trying to take the time that'ses necessary to understand in detail the businesses of these companies and what is appropriate. i would say, again, though, that we do have some constraints in what we're able to do because of the collins amendment. >> okay. so could you give me some insight into what extent might the tailoring -- >> i want to take a break from the janet yellen testimony for a moment to give you breaking news regarding nelson peltz and pepsi trying to get pepsi to split its beverage and snacks business. you may recall that mid last week he sent, this is nelson peltz sending to pepsi another

white paper, try end letter and urging them to separate the global snacks and beverages business. indra nooyi said they had no plans after an exhaustive review to do that. nelson peltz responded saying they would take the case directly to individual shareholders. i just spoke with nelson peltz who tells me that is under way. he says he has spoken with several shareholders and has gotten a positive reaction tr them. he tells me we will relentlessly take our case to the every major shareholder in the coming weeks. mr. peltz saying that we've got nothing but rhetoric from pepsi. we believe in the stand alone beverage business. in fact, we're willing to buy more stock to show it. we're also willing to go on the board if asked. plr mr. peltz telling me the ppower

one strategy does not work and it proves it. you can certainly say that, that irene rosenfeld's total shareholder return is greater than indra nooyi. ceo of mondelez. and he holds a considerable stake in that company. on going battle between nelson peltz and pepsies ask la es ske. he has gotten a positive response from them. he is going to be, in his words, relentless in the coming weeks and speaking to more of them. so we'll continue to watch this story, carl? >> and we watch the stock move as well, scott. thanks for that. let's take you back to the senate banking committee and janet yellen. i've been very concerned about this monetary policy for some time. i wonder if you could, for the committee, give us a sense of how you would quantify the benefits that the economy has

enjoyed, assuming you believe there are benefits from this unprecedented we've been engaged in. a lot of economists look at traditionally understood transmission mechanism to be asset priced, translate into more spending and the quantification of that gives some very, very modest numbers. i wonder how you quantify the benefits from quantitative easing we've had. >> so i don't have a quantitative estimate that i can present to you today. there are a range of estimates in the literature. you know, we hit the so-called zero band in december of 2008. we lowered the fed's over night interest rate target to zero. standard rules like the tailor rule would have called for substantially more accommodation rules like that would have said that we should go to minus 4 or

500 basis points if we could, and we could not. and so we looked for other ways to provide the accommodation that the economies seem to need. so asset purchases and forward guidance, i think they have served to push down longer term interest rates. we have seen some significant recovery in housing. the backup in rates we have seen last spring and summer clearly seems to have had a negative impact on housing. so i think it's fair to say that we were successful in pushing down longer term rates through these policyies. we did see a positive response in housing. i think if the area of vehicle sales, interest sensitive spending -- >> i've t got limited time. i'm aware of the changing and

economic statistics but the point is you don't have a quantification for how much of that is attributable to the quantitative easing. i guess the second question i have -- >> there are estimates that -- >> but there's not one that's -- that you've endorsed or that you subscribe. >> i have kricited some and i provide some details on some that i've cited. >> on the risk side of this equation. i know you did mention some of the things you're looking for. many people believe that last decade the unusual monetary policy including maintaining negative or real interest rates for an extended period of time at the short end of the curve anyway contributed significantly to the housing bubble that later burst, of course. do you agree that that was a contributing factor and, secondly, along the risks that you look at as we hopefully move to normalcy, which ones concern you the most? i've bgot one last really short question. >> so i think it will take a

while to -- for scholars to decide exactly what role the monetary policy had, contribu contributing to the financial crisis. i would not argue with the idea that a long period of low interest rates, those contribute to the build-up of leverage and may have touched off a housing bubble. but i think on the regulatory side and the supervision side there were also failings that contributed importantly to the crisis. we're watching very carefully for the development of any such excesses. we are very focused on not allowing such a thing to happen again. and while there might be a few areas where i have concerns such as deteriorating underwriting

standards and leverage lending, form land prices, a few things, i don't see those excesses having developed at this point with respect to housing prices, they have rebounded significantly are main not back to their peak levels by any means and price in rent in housing is normal ranges. so i don't think we've promoted those kinds of excesses, certainly not at this stage. >> thank you. my last question, you've stressed a couple of times the tornt that you attach to fulfilling the congressional legislative mandate to maximize employment as well as the other portions of the mandate. my question is, would the behavior of the fed with the actions and the policies of the fed be any different at all if the fed had only a single

mandate and that were price stability? >> so over this last several years, i think the answer is no because at the moment -- >> how about today? >> well, inflation is running well below our objective and employ is falling short of full employment. so both of these -- both pieces of the mandate are giving us the identical signal, namely we need an accommodative policy. now, there can be situations where there could be conflicts between the objectives and in that sense it would make a difference. it might make a difference to have a dual mandate rather than a single mandate. at the moment, there is no such conflict. my personal view is that this mandate has served us quite well. and most central banks, even if they have an inflation target, also have a mandate to take account of economic growth. >> although the ecb does. right?

>> that is true. >> thank you very much. mr. chairman? >> senator egen. >> thank you, mr. chairman. and chairman yellen, welcome to the committee. i was so pleased at the beginning of the hearing to hear chairman johnson's introduction and welcome to you as the first woman to head up the federal reserve. so welcome. >> thank you so much. >> my questions, my first one is, during the january 2014 federal open market committee meeting, the committee authorized the federal reserve bank op new york to conduct a series of fixed rate overnight reversed repurchase operations involving u.s. securities and securities that are guaranteed by agencies of the united states. the authorization runs through january 30th of next year, of 2015, and specifies an offering rate of 0 to 5 basis points that you have the authority to waive. the program, which has been steadily extended and expanded,

is being considered for use in supporting the implementation of monetary policy. so i want to ask you some questions about this. can you begin by describing this program, its scale, and then your vision for its expanded use, and also if you can talk about the dollar volume of these operations. >> so this fixed rate overnight reverse repurchase facility is one where we're essentially borrowing from a non-banking -- from -- >> i want to take a quick break here. breaking news harding eric holder. scott cohn is at headquarters. >> carl, the attorney general is in the hospital this morning. the justice department says he experienced faintness and shortness of breath during a morning meeting with senior staff. he is now reported resting comfortably in good condition and conferring with his doctors.

we'll keep you posted as we get more on eric holder's condition. back to you. also want to take a break from yellen for simon hobbs who joins us this morning. >> in fact, hilton's ceo after six years has just completed its first analyst conference call of the first quarterly earnings since successfully returning the giant to the public market with december's ipo. from virginia now, the president and ceo of hilton joining us in another cnbc exclusive. chris, welcome to the program. nice to see you. >> how are you doing, simon? since we were on the floor of the exchange. >> i know. i know. it was a great day. the audience, people are very focused on what we are hearing from janet yellen, the federal reserve chair, and she has just said that it's too early really to know what the effect of the bad weather is going to be. is that true for you guys in lodging? you just had two standout weeks of industry data. are you guys on a major turning point?

>> listen, i think there's no question there's a little bit of impact from weather in the first quarter. both here in the u.s. and the impact -- the knock on impact it had in other parts of the world, particularly london just because of the domestic u.s. travelers to london stayed home. i think it's a pretty modest impact overall. obviously impacted january, a little bit of february. but february ended up being a pretty strong month. we think march is going to be quite strong. >> okay. >> if you think of it in our business, you know, we had the sequestration impact last year at the end of the first quarter. we're sort of overlapping over that which will help us as we get to the end of the quarter. >> chris, stay with us for a minute, if you would. we have more breaking news at headquarters. it's a busy day here on cnbc. >> simon, thanks so much. new information in a fight now between dan loeb and sotheby's in a filing just hit a moment

ago. third point said it will nominate three members to sotheby's board of directors. those nominees including mr. loeb himself. harry wilson on the yahoo! board, turn around specialist, he went on to the yahoo! board with mr. loeb. and resna who now works in the luxury jewelry industry. sotheby's board is currently meeting in new york city at this moment. so they are literally learning of mr. loeb's plan to put three people on the sotheby's board as they are sitting in their very own board meeting in new york city. as many of you know, third point is sotheby's largest shareholder. he has written letters. he has asked for ceo william to be replaced among a number of other things. but he is stepping up his battle wanting to go on sotheby's board along with two other people. you can see the stock is on the

move. we'll continue to work this story and have anything new on the "half time" show in 15 minutes. simon, back to your interview. >> let's return to hilton worldwide headquarters where we're still with chris, the ceo. you reported yours first quarterly earnings since becoming a quarterly company. not just that you have the biggest pipeline in the industry. say the industry experts but also this operating profit of $2.4 3w8. mid point which is above expectations. what do you see for the future? >> listen, first of all, we had a great year last year. we finished at the year both top line, bottom line, and unit growth at the top of the industry. and we're very optimistic about 2014. we're optimistic because as we look at 14 versus 13 and you go around the major regions of the world, particularly starting here in the u.s. and then europe which are a large part of the business, b both of those

economies are going to be better than they were in 2013. and we look at other parts of the world, asia pacific, is going to maintain a reasonable amount of strength. when we do the math and we look around the world of what's going on, we're very optimistic. we ended last year, you know, with the 5.2, we just guided, you know, 5 to 7 which obviously wants to imply positive momentum on a year to year basis and we're pretty confident that's going to occur. certainly what we see so far, it is. >> what do you see in asia in particular, in china in particular? because the rate at which you're growing in china on this rev par benchmark at 8.6% is higher than your rivals at marriott or starwood. ubs is suggesting that it's because you're later in the game here, still expanding in the faster growing bigger cities than the smaller ones which don't grow as rapidly. comment? >> that may be part of it. i think if we look at, you know,

we're taking share away from a lot of our competitors as well. our rev par growth in china was 7% on a same store basis last year. we do think it's going to be a little bit lower this year. 5 1/2 to 6. that is the result, you know, overall economic growth in china slowing a bit. the compensating for that in our business because it's a decent part of our business is japan where last year we had double digit rev par growth in japan. honestly we're confident we're going see that again this year. when you weight those two things against each other, asia pacific is going to be bleeding the world again at the very high end, i would say, of our guidance in terms of overall rev par growth. >> if there was a slight disappointment, to be honest with you, it's here in this country where a 4.7% growth, you are behind those two major rivals. i think i heard on the conference call some commentary that that may be about new york

that actual ily prices under pressure here because of the buildout unusually thatoff had. would that be true? >> it's a little bit. i don't think we're out of sync with our competitors in new york. if you look at our u.s. business last year and fourth quarter, it was comparable or better than most of our competitors. so i think we performed just fine. reality is the fourth quarter for us was impacted a little bit by the government shut down. it probably cost us a full point in growth. and we may be a little bit more disproportionately impacted by that than some of our competitors because it disproportionately hit limited service properties in secondary locations that depend on government business or government-related business more than other types of prot properties. obviously government shutdown and all -- most of the noise in washington is sort of over. >> sure. >> for the moment, and so we've seen that snap back. so if you look at our full year

rep par growth at 13 at 5.2% and you compare it against our major competitors we were at the high end of the mark. we beat most of our competitors. >> chris, just before we let you go. the big question, particularly for the big money, the big money that's coming out of middle east that are buying hotels around the world, is where we are in the cycle, and rachel rothman is pointing out today, we're in the fifth year of the up turn and therefore pricing. >> right. >> she's saying that the longest cycle we've had in modern times has lasted eight years. if we are now in the fifth innings, what are the implications for that? >> listen, i would say we're not quite the fifth. i would say mid cycle. and i would argue this is going to be a more extended cycle than prior cycles for a couple of reasons. one, we have not -- it's been slowing to rebound. if you look at this cycle versus prior cycles the growth coming out of it has been much more

muted. if you look at one of the most important factors that will drive the turning of the cycle which is the supply side. supply side of this is still at historically low levels a little bit more than 1% in the u.s. against a 2 1/2% 30-year average. why is that? because of capital markets have not and are not really providing the capital to make that happen. listen, i think we're mid cycle. as long as you continue to see steady economic growth, maybe even a little bit of an uptick and it's matched by very low supply which is pretty much in the bank for the next several years, you're going see very positive fundamentals. just the laws of economics. i would argue there is a lot of cycle left and this is a little bit different than prior cycles. mostly driven by the fact that it's been muted demand growth and very, very low supply for an extended period of time. >> that's it then, chris. you've successfully come out with the earning, you've done your conference call, and tv interview. congratulations.

welcome back. >> thank you. thank you. we're off to a good start. look forward to talking to you after the first quarter. >> you're always welcome. thank you. and thanks to you, simon. while you've been listening to simon and chris, joe manchin of west virginia has been asking yellen about bitcoin. you might know by now that joe manchin asked for stricter limits on bitcoin and yellen told him the fed lacks the authority to supervise or regulate it in any way because there is obviously no central issuer to bitcoin. >> a good thing a lot of other regulators, new york state and treasury, has beening booing bitcoin. he's calling for the ban of bitcoin, saying that it's dangerous. i just like that he brought it up during the testimony. >> very nice. in the meantime, breaking news continues this hour. scott cohn is back at headquarters. scott? >> busy day, darl. federal prosecutors in manhattan have unsealed an indictment against a british computer hacker now accused of hacking the fed. the federal reserve as well as

the federal reserve bank of chicago, the man is 28-year-old lauri love accused of two-count indictment unsealed today in new york. he was previously accused of hacking various other government website, military websites, nasa and so on, in a year-long hacking campaign. and allegedly boasting about his hacks on a chat room. he is reportedly still in the uk and u.s. authorities will likely seek extradition of lauri love indicted for hacking the fed. carl, back to you. >> some unfortunate timing with yellen still on the stand there. scott, let's go back to capitol hill. elizabeth warren doing the questioning. >> in principle support what we've asked for in this letter that is clear and concrete evidence that the board is involved in supervisory and monetary -- supervisory and regulatory policy. >> it is completely appropriate for the board to be fully involved in important decisions.

and i -->> and voting is a good way to do that. >> i intend to make sure that we are. >> thank you. thank you. now, i want to ask about another aspect of this mortgage settlement. when the deal was struck, the fed had a big press release to announce a $9.3 billion settlement, but it turned out that of that $9.3 billion, $5.7 billion was in the form of credits. for what the fed described in its press release as, quote, assistance to borrowers such as loan modifications and forgiveness of deficiency judgments. what the press release didn't say is how the credits would be calculated and later it came to light that under the agreement mortgage companies could get away with actually paying only a fraction of that $5.7 billion. now, the fine print in this settlement could potentially reduce the direct relief to borrowers by literally billions

of dollars. so senator coburn and i recently introduced a bill, truth in settlements act, which require every agency to publicly disclose the key details of their settlement agreements, including the method of calculating the agreements, whether it's tax deductible and so on. and the disclosure would be required up front, at the time this settlement is announced. now, the fed doesn't have to wait for congress to do that. you could voluntarily adopt that public disclosure now. will you do that? >> so i agree with you it's important for us to disclose more and to disclose as much as we can. and we'll look at that carefully and try to provide more information. >> in principle we're talking about more disclosure here? >> correct. >> you know, i think this is really important because this is about accountability. we want to be able to hold our financial institutions accountable, but it also means

accountability for our regulatory institutions. >> agree. principle i endorse. >> good. thank you. i want to just to we low-up quickly, if i can, on senator brown's question about too big to fail. you said that we've made significant progress but much work remains to be done. and i agree, but i would note that since the financial crisis in 2008 the five largest financial institutions are 38% larger than they were back then. so my question is, what evidence would you need to see before you could declare with confidence that too big to fail has ended? >> i'm not positive that we can declare with confidence that too big to fail has ended until it's teed in some way. i mean, i do believe that there

are demonstrable improvements in terms of the amount of capital and liquidity that we have, you know, put in place both through stress testing and dodd frank regulations. there is more to come in the form of surcharges and likely a supplemental leverage ratio. there is a whole agenda here of minimum debt requirements. i think it's important to feel that we have solved too big to fail, that we have the confidence that if an institution were to get in trouble, that we could actually resolve that institution. >> and i'm overtime, sir. i really will quit, mr. chairman. he's strict with us. but i just want to draw in on this a little bit. so long as the markets believe that too big to fail has not ended, and they demonstrate that by reducing capital costs for the banks that are perceived to be those that the government would rescue, do we still have a too big to fail problem?

>> well, the markets may think that we will rescues such an institution and may not end up believing us until we put it through resolution. so we we can't guarantee that they have an appropriate view of how we are going to handle such a situation. but i do think it is appropriate to look at estimates of subsidies and so forth in judging what progress we're making. i don't think it's definitive but it is certainly appropriate to keep track of those market metrics. and i mean, we see that rating agencies are changing their methodology, diminishing the amount of their estimates of the amount of support that would be forthcoming. and i think as we, you know, complete our work on orderly liquidation, putting in place minimum debt requirements and working with foreign supervisors to feel we really could affect

an orderli lly liquidation if i came to it, that estimate of market subsidies should certainly come down. >> thank you very much. i like forward to our continuing to track that data. thank you, mr. chairman. >> senator warner. >> thank you, mr. chairman. madam chairman, you're on the home stretch. >> thank you. i know senator brown has raised repeatedly, you know, i am -- >> we are in the home stretch of the q and a for janet yellen in front of the senate banking committee. before we wrap up the hour a couple minutes until high noon, steve liesman is back at hq. she's run through a lot. well prepared for some of senator warren's questions. steve, your thoughts? >> and also the news about bitcoin is interesting. fed does not regulate these institutions. that the banks that are regulated do not deal with bitcoins but said it's appropriate for congress to question the regulatory regime around it and the fed is looking into this. so some news on a very interesting issue about it.

also, to senator warren, to your point, carl, she seems prepared for the issue of should the federal reserve board be voting on these big settlements out there. currently not voting on it. yellen seemed to agree that they should be doing it. that would be a change in federal reserve procedure, carl. >> watching the market reaction, steve, here. it looks like stocks not a whole lot of reaction. dollar is weaker. anything to trade on from this testimony yet? >> i don't think so. i saw the last i looked at ten-year highly unchanged. probably the best way to put it. the markets seem to take -- to be up just a little bit in response to it. we're not getting anywhere on the key issue of monetary policy and what it would take to stop the taper. she used the term notable change in the outlook at the house testimony today. she said significant change in the outlook. i don't see a big difference significant and notable both would require a big change of the taper to be on my read of it unless the fed comes to some conclusion that it's not weather, that there's a broader weakening in the economy. >> thanks for your guidance.

we will take you back for the tail end of the hearing. >> fall below on the smaller institutions. i think it was good in theory. the challenge has been as best practices to kind of built into the regulator's mindset even though there may not be a legal requirement for these additional regulatory obligations. for these smaller institutions p. i know earlier on when he was head of the fdic there were, in fact, job owning efforts and others. i would encourage you and your colleagues and fdic, when kol plins is the fastest growing area in the finance industry that should be of some concern. and in some institutions it needs to be but in some of our smaller institutions, we are, i think, affecting the market in a